BMP-2/4, members in TGF-beta superfamily, are potent growth factors in inducing osteoblast differentiation and stimulating bone formation. Signaling in TGF-beta superfamily is mediated by direct phosphorylation of Smad proteins. Smad2 and Smad3 are phosphorylated by TGF-beta and activin receptors, whereas phosphorylation of Smad 1 is specifically induced by bone morphogenetic proteins. Upon phosphorylation these Smad proteins interact with a common partner, Smad4, and translocate into the nucleus where the complex recruits DNA binding protein(s) to activate specific gene transcription. However, the DNA binding protein(s) involved in BMP signaling has not been identified. We have demonstrated that BMPs induce the interaction of Smad1 with Hoxc-8, a member of the homeodomainn transcription factor family. The interaction of Smad l with Hoxc-8 inhibits the binding of Hoxc-8 to its DNA binding site. Hoxc-8 functions as a transcription repressor. A hox binding site is characterized from the 5- flanking region of osteopontin gene, and BMP-induced osteopontin gene transcription is mediated through this Hox binding site. We hypothesize that BMP-2/4 induces osteoblast cell differentiation mediated by the Smad1 interaction with Hoxc-8. The specific aims proposed are to:l) characterize the specificity of the interaction between Smad1 and Hox proteins in BMP2/4 signaling; 2) map domains that are responsible for the interaction between Smad1 and Hoxc8. The effect of mapped Smad1 interaction domains) on gene transcription will also be assessed in luciferase reporter transfection studies. 3) Characterize the effects of the interaction between Smad1 and Hoxc-8 on osteoblast differentiation in human primary stro-1 cells. Further characterization of the interaction between Smad1 and Hoxc-8 will help us to understand the mechanism of BMP signaling and may yield a potential drug target to stimulate bone formation in osteoporosis patients.